RBC WEALTH MANAGEMENT ANALYST AND INVESTOR DAY FRIDAY, OCTOBER 21, 2011

Transcription

1 RBC WEALTH MANAGEMENT ANALYST AND INVESTOR DAY FRIDAY, OCTOBER 21, 2011 DISCLAIMER THE FOLLOWING SPEAKERS NOTES, IN ADDITION TO THE WEBCAST AND THE ACCOMPANYING PRESENTATION MATERIALS, HAVE BEEN FURNISHED FOR YOUR INFORMATION ONLY, ARE CURRENT ONLY AS OF THE DATE OF THE WEBCAST, AND MAY BE SUPERSEDED BY MORE CURRENT INFORMATION. EXCEPT AS REQUIRED BY LAW, WE DO NOT UNDERTAKE ANY OBLIGATION TO UPDATE THE INFORMATION, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. THESE SPEAKERS NOTES ARE NOT A TRANSCRIPT OF THE WEBCAST AND MAY NOT BE IDENTICAL TO THE COMMENTS MADE DURING THE WEBCAST. YOU CAN REPLAY THE ENTIRE WEBCAST UP TO APRIL 21, 2012, WHICH INCLUDES A QUESTION AND ANSWER SESSION, BY VISITING THE ROYAL BANK OF CANADA ( RBC, WE OR OUR ) WEBSITE AT RBC.COM/INVESTORRELATIONS. IN NO WAY DO WE ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON OUR WEBSITE OR IN THESE SPEAKERS NOTES. USERS ARE ADVISED TO REVIEW THE WEBCAST ITSELF AND OUR FILINGS WITH THE CANADIAN SECURITIES REGULATORS AND THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION ( SEC ) BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. CAUTION REGARDING FORWARD-LOOKING STATEMENTS From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. We may make forward-looking statements in these speakers notes, in other filings with Canadian regulators or the SEC, in reports to shareholders and in other communications. Forward-looking statements in these speakers notes include, but are not limited to, statements relating to RBC and our business segment outlooks, the economic and regulatory environment and our strategic goals. The forward-looking information contained in these speakers notes is presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as believe, expect, foresee, forecast, anticipate, intend, estimate, goal, plan and project and similar expressions of future or conditional verbs such as will, may, should, could, or would. By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate and that our assumptions may not be correct and that our financial performance objectives, vision and strategic goals will not be achieved. We caution readers not to place undue reliance on these statements as a

2 number of risk factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. These factors many of which are beyond our control and the effects of which can be difficult to predict include: credit, market, operational, and liquidity and funding risks, and other risks discussed in the Risk management and Overview of other risks sections of our 2010 Annual Report and in the Risk management section of our Q Report to Shareholders; general business, economic and financial market conditions in Canada, the United States and certain other countries in which we conduct business, including the effect of the European sovereign debt crisis and the lowering of the U.S. long-term sovereign credit rating by Standard and Poor s, changes in accounting standards, policies and estimates, including changes in our estimates of provisions, allowances and valuations; the effects of changes in government fiscal, monetary and other policies; the effects of competition in the markets in which we operate; the impact of changes in laws and regulations, including tax laws; changes to and new interpretations of risk-based capital guidelines, and reporting instructions and liquidity regulatory guidance, and the Dodd-Frank Wall Street Reform and Consumer Protection Act and regulations to be issued thereunder; judicial or regulatory judgments and legal proceedings; the accuracy and completeness of information concerning our clients and counterparties; our ability to successfully execute our strategies and to complete and integrate strategic acquisitions and joint ventures successfully; and development and integration of our distribution networks. We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf. Additional information about these and other factors can be found in the Risk management and Overview of other risks sections of our 2010 Annual Report and in the Risk management section of our Q Report to Shareholders. Information contained in or otherwise accessible through the websites mentioned does not form part of these speakers notes. All references in these speakers notes to websites are inactive textual references and are for your information only. GORDON M. NIXON, PRESIDENT & CEO Thank you, Amy and thanks everyone for joining us. I am pleased to be here today as our wealth management business, which you will hear lots more about, is an important growth segment for our organization. As you know, and have recently seen from the U.S. banks third quarter results, it continues to be a very challenging time for global financial services, and more specifically to businesses that are market-sensitive. Notwithstanding these pressures, we are continuing to focus on building our business for longterm growth and I am encouraged by RBC s competitive position. Starting with Slide 4, we are the clear leader in Canada and continue to leverage our domestic strength to build globally competitive businesses. Today, you will hear how RBC Wealth Management contributes to both elements of this approach. Our focused long-term strategy is centred on the principle of diversification as we aim to generate approximately 75 percent of earnings from retail, including banking, wealth management and insurance, and approximately 25 percent from wholesale through the cycle.

3 This strategic mix mitigates risk, contributes to earnings stability, and will help us continue to deliver long-term value to our shareholders. Our strong capital position and financial strength are key competitive advantages in today s environment. Over the past few years, we have sold assets, de-risked the balance sheet and we ve built up a strong capital position in anticipation of economic and financial instability in the Euro-zone and the United States. This provides us with significant flexibility to take advantage of opportunities, without compromising our financial strength critical in today s unstable environment. This financial strength has also enabled RBC to continue executing on its long-term strategy, in which RBC Wealth Management certainly plays an important role. Turning to Slide 5, let me explain why we are actively growing this segment. To start with - on a macro level, as you all know, favourable industry trends continue to present attractive dynamics for growth. For example, demographic trends in developed economies continue to drive demand for retirement-related products, for solutions, and for advice. Globally, high net worth individual wealth is expected to grow by at least 8 percent annually over the next five years, driven especially by a growing number of high net worth individuals from various emerging economies. Another reason we are growing this segment is due to its low capital intensive nature, making it an excellent complement to our banking and Capital Markets segments which require more balance sheet to grow and meet clients needs. Additionally, within the financial services spectrum, the regulatory environment for wealth and asset management remains relatively stable giving us the ability to invest in this segment with some degree of certainty and confidence. Finally, the soundness and reputation of the Canadian financial system as a whole represents a significant advantage globally. Clearly the long-term fundamentals are strong, despite current headwinds of uncertain markets and low interest rates. At RBC, the prospects for growth are even more compelling. To start, RBC s strength, stability and brand give us an exceptional competitive advantage both here in Canada and abroad, particularly as we are building our global presence. The breadth and depth of RBC s wealth and asset management capabilities are perfectly suited to meet the sophisticated needs of high net worth clients globally, and the strength of our businesses, including Canadian Banking, International Banking, Insurance and Capital Markets, enable us to provide unmatched advice to our clients for all their financial goals. And, as George and his team will explain, we ve been focused on building this segment for a long time and have an extremely strong on which we will continue to build its growth. With that, I will now turn it over to George Lewis and his team. GEORGE LEWIS, GROUP HEAD WEALTH MANAGEMENT Thank you Gord, and welcome everyone. We are pleased to be meeting with you today to provide an overview of our strategic plan to build a leading global wealth and asset manager. Now, as we execute our ambitious five year plan, which I will discuss later in my remarks, leadership will be a critical component and I m very fortunate to have such a talented team, many of whom are with us today.

4 In addition to John Montalbano and John Taft who Amy introduced at the outset, we also have: David Agnew, Paul Patterson, Stuart Rutledge, Gay Mitchell and Ingrid Versnel as well as members of my global functions management team here in the room and Barend Janssens who is joining us on the phone from Singapore. Turning to Slide 7. The three key elements of our plan are: Number one, building a global high-performing asset manager this business is already our most profitable and we plan to extend its global reach; Expanding our share in the High Net Worth and Ultra High Net Worth markets by extending our leading position in Canada and broadening our presence in these client segments globally; and finally; Leveraging RBC and RBC Wealth Management s strengths and capabilities, which will provide both revenue growth and cost management opportunities. Now, before we go into more detail about our growth strategy, I think it is important to highlight our achievements to date. Looking at Slide 8, our success comes from our holistic value proposition and our differentiated, relationship-based approach which gives us the ability to introduce additional RBC products and solutions to our clients. Through this approach, we have grow to be a leading player in both Canada and abroad, as demonstrated by our ranking as the sixth largest wealth manager in the world. Slide 9 shows RBC s history in wealth management. Even before we established a global focus for this segment in 2007, RBC had been building in Canada and internationally. In the 2007 to 2009 period, we focused on delivering strong financial performance in extremely challenging market conditions and strengthening the position of our individual businesses that included taking advantage of our competitors challenges in the U.S to strengthen our advisor base there as well as and securing our leadership of the wealth and asset management business in Canada through the acquisition of Phillips, Hager & North in Beginning last year, we developed an integrated segment strategy and launched our revitalized organizational structure to achieve our goal of establishing RBC as a global leader in wealth and asset management by As you can see from the posters in the room, and as you ve probably seen in the media, we recently launched our new global brand. Increasing our global brand presence is a critical component of our growth strategy and we believe this is an opportune time to attract and retain clients and client-facing professionals looking for the strength, stability and integrity that our business and brand embodies. As we build our global business, we will also continue extending our lead in the Canadian market, together with our partners across RBC. As you can see on Slide 10, our wealth and asset management businesses serve affluent, high and ultra high net worth clients with integrated advice across investments, banking, credit, tax, trust and custody and delivers asset management and trust solutions to both individuals and institutions. Our segment does not include Canadian branch investments - mutual fund advice and distribution, Canadian Private Banking or our self-directed brokerage, RBC Direct Investing. While we work closely with each of these businesses, they are all housed in our Canadian Banking segment in our view, to best leverage client and distribution opportunities. Insurance is a separate segment for RBC unlike some of our Canadian peers who include it within their wealth management segments. We do actively partner with our Insurance segment to offer clients life insurance, annuities and segregated funds which represent important elements of estate and retirement planning.

5 Turning to Slide 11, one can see that even though we define and report our segment more narrowly than our Canadian peers, RBC Wealth Management is larger even without adjusting to compare apples to apples. Now, to assist you in a better comparison with our Canadian peers, we have included in the earnings chart shown here, the contribution from our RBC Direct Investing, Private Banking and Insurance businesses. Turning to Slide 12, we primarily benchmark against global players with a similar definition of wealth management, most of whom are shown here. In establishing our long term financial goals, we are guided by financial performance especially in terms of pre-tax margins attained by the best in this group, which are not necessarily the largest in terms of client assets. Slide 13 reflects our new revitalized organizational structure, which was designed in 2010 to enable us to successfully execute our five year growth strategy. As part of the change to accelerate growth, we moved from four business units to six, including four geographic wealth businesses and two global solution businesses - Global Asset Management and Global Trust to highlight our world-class capabilities in each. We also created two global support teams in Global Wealth Services as well as Operations and Technology to improve our efficiency and effectiveness by both lowering costs and by leveraging client and product-related revenue opportunities across our segment. Now, I want to turn to our financial performance and drivers of financial performance on Slide 15. Despite the challenging environment in recent years, we have consistently grown our client assets since 2007; both through organic growth and acquisitions like Phillips, Hager & North and more recently, BlueBay Asset Management. Over the same period, we continued to shift our business towards a more favourable revenue mix with a greater emphasis on recurring fee-based revenue. In fact, since 2007 we have increased the proportion of fee-based revenue from 52 to 59 percent of the segment total. Slide 16 highlights our earnings over the same period, along with the performance of the S&P 500 and U.S. 3 month T-bill rates. Based on this market data, you can clearly see how challenging the environment has been for global wealth managers and their clients and, as you read every day in the paper, today s environment continues to present significant near-term headwinds for our business. We also show Adjusted Cash Earnings to highlight the fact that acquisitions result in non-cash expenses as it relates to the amortization of intangibles. This means that as acquisitions become a greater focus, we will continue to generate greater cash earnings for capital generation and dividends from the segment than suggested by reported GAAP earnings. In response to your questions, we have also highlighted certain accounting volatility, compensation accounting and tax adjustments which have impacted our recent results. On slides 57 and 58 of the appendix we provide a detailed reconciliation of these impacts and we would be pleased to address these further during the question period. In order to gain a clear understanding of our results, I think it is important to step back and discuss the key drivers of our financial performance, as highlighted on Slide 17. First, wealth management businesses are significantly impacted by market returns as fee-based revenue is driven by the level of client investment assets. To give you a sense of the impact, a change of one percent in equity markets at the margin would impact RBC Wealth Management annual earnings by over $10 million dollars. Second, interest rates are key drivers of our results. The current low rate environment, which is expected to remain for some time, results in spread compression on deposits and lower fee-based revenue due to fee waivers on our U.S. money

6 market funds. This environment significantly affects earnings, as there are relatively lower costs associated with spread revenue compared to transaction and fee-based revenue. To quantify the impact that interest rates have on our business, a 100 basis point increase in rates is estimated to have a full year after-tax impact of $130 to $150 million dollars in earnings. Lastly, transaction revenue has been negatively impacted by reduced investor confidence driven by uncertainty in the global equity and debt markets. While some clients increase their trading activity during uncertain markets, this would be more typical of self-directed investors rather than clients of full-service firms such as RBC Wealth Management. Turning to Slide 18, which shows the relative contribution of our businesses, there are a number of takeaways from this slide. First, there are significant pre-tax margin differences among the various businesses in RBC Wealth Management. As Global Asset Management and Wealth Management Canada are our highest margin businesses and significantly exceed their respective industry averages, continuing to extend our lead in both of these businesses, is a key element of our strategy. Second, higher margins in the asset management industry and in RBC Global Asset Management, in particular, are one of the reasons we have focused our acquisition activity in this business. Finally, as you can see, we have built a sizable business in the U.S. from a revenue perspective, and are very focused on improving operating margins, and leveraging the capabilities of RBC and RBC Wealth Management that are not available to others in the challenging U.S. market. And John Taft will expand on this further in his remarks. So that gives you a sense of our progress to date, I would not like to share our five year growth plan on Slides 20 and 21. As highlighted, we are aiming for $2 billion dollars in earnings by We know this is a very ambitious plan, but given the dynamics of this business, including the relatively low risk and low capital - intensive nature, which Gord spoke to earlier, we believe it is appropriate to set aggressive goals. We expect the growth to come from three main drivers organic growth, leveraging acquisitions and market drivers. Forty to fifty percent of our growth is expected to be organic, driven by our four largest businesses: Global Asset Management, Canadian Wealth Management, U.S. Wealth and Global Trust, including the impact of cross-segment initiatives enabled by our integrated strategy and structure. Later in the presentation, my team and I will expand on these areas. The second key component of our growth strategy involves leveraging our acquisitions. In particular, we are building on our BlueBay acquisition where we are already seeing some good traction. Lastly, a key part of our growth plan is driven by assumptions of improving market conditions. This is the only element of the plan that is behind schedule! To achieve our 2015 goal, we assume that interest rates will return to a more normal level - up at least 150 basis points, and that average market returns will revert to 5 to 6 percent per annum. In addition to our business-specific plans, on Slide 22, we highlight our three global support teams who will drive cross-segment initiatives. First, we have dedicated ultra high net worth relationship teams lead by Gay Mitchell in Canada and Mike Lagopoulos internationally.

7 Their mandate is to broaden and deepen relationships with existing UHNW clients and attract new ones who are re-examining relationships with their existing financial institutions in these turbulent times. Moving to Global Wealth Services. Their objective is to provide best-in-class product and service support for our geographic wealth businesses in order to increase the productivity of our clientfacing advisors, drive an excellent client experience and develop a highly integrated client offering and strong referral program among the different component of RBC and RBC Wealth Management.. Additionally, our Operations and Technology team is building and maintaining a best-in-class technology platform and identifying global efficiency opportunities. One example of how we intend to leverage these central capabilities across our geographic businesses is shown on Slide 23, which involves growing our loan book to $25 billion dollars by Since 2006, we have generated 10 percent annual growth in our loan book from key international markets like New York, London and Hong Kong, through our network of credit specialists and private banking relationship managers. However, the fact is, most of our high and ultra high net worth clients do not currently borrow from us and our loan book represents only 2 percent of our client assets low relative to a peer group average of 5 to 7 percent. We see opportunities to grow in this area as extending credit is an important component in a comprehensive wealth management offering. Additionally, we like this business as margins are healthy, credit quality is extremely strong and offering credit solutions has proven to strengthen the overall client relationship. This credit initiative is just one of a number of initiatives, including both revenue and cost programs, that are being implemented across our businesses and support groups, with specific action plans and monitoring to ensure we stay on track for this element of our 2015 goal. Furthermore, we are motivated to stay on track. Our senior leadership team, comprised of more than 50 key members of our different businesses and support groups, are directly engaged in the overall success of RBC Wealth Management, not just their individual unit, with 50 percent of their deferred compensation tied to the growth of our segment s bottom-line. Now, as mentioned earlier, leveraging acquisitions is a key driver of our growth strategy. Let me take a few moments to demonstrate our tack record of success in this area by focusing on Phillips, Hager and North. As you will see on Slide 24, this acquisition has been successful as measured by our strategic and financial objectives at the time of the acquisition. In just 3 years we have almost doubled PH&N s retail assets under management to over $15 billion dollars, a significant component of RBC Global Asset Management s overall #1 position in the fund industry, and most of this growth driven by net new sales. The acquisition gave us a leadership position in the Canadian institutional market and brought us the management talent to integrate our U.S. institutional business and create a global platform. It also made us the #1 overall fund company in Canada. From a financial perspective, we are pleased with the contribution from PH&N, especially within the context of the market and economic conditions seen over the last few years. We have generated a return on investment of 8 percent, which will continue to grow over time given the nature of this business. Our pre-tax margins are over 50 percent, which as you saw on Slide 18 is significantly higher than the industry average for asset managers, and our talent retention and attraction has been excellent.

8 One of the reasons this acquisition was successful was the seamless integration that occurred between PH&N and RBC Asset Management under the leadership of John Montalbano. As John will discuss soon, we are already seeing similar success with our BlueBay acquisition. Going forward, we look to further expand our asset management capabilities through strategic acquisitions. As Gord mentioned, we have the financial flexibility and the strength to benefit from disruptions in the market and we will take our time and be opportunistic in the current environment. With that, I will now turn it over to John Montalbano, who will discuss our Global Asset Management business. JOHN MONTALBANO, CEO RBC GLOBAL ASSET MANAGEMENT Thanks George, Good morning everyone, I am pleased to be here today to discuss our strategy to continue building our position as a global leader in asset management. We ve undergone quite a transformation in the last several years. As you will see on Slide 26, in 2007, we were already a leading Canadian asset manager with close to 90 billion dollars in assets under management. In four short years, we have expanded our capabilities through both strong organic growth and key strategic acquisitions. We now have more than 250 billion dollars in retail and institutional assets under management globally. On Slide 27, you can see that we have a proven history of strong financial performance and have continued to deliver shareholder value, notwithstanding the tough market conditions experienced in the past few years. Our scale and scope are key differentiators when it comes to operating efficiency. As George highlighted, in a recent industry study we were ranked in the top-tier for profitability and were 1.5 times more profitable than industry average. This translates into an extremely attractive business for RBC Wealth Management, since our asset management business delivers approximately 45 percent of the segment s earnings. Turning to Slide 28 let me highlight some of the key drivers of success for asset management, how we are performing relative to those drivers, and why we can continue to succeed and deliver value to our clients and shareholders. First, delivering strong and consistent investment performance is critical to any manager s success, and it s something that we do quite well. We ve invested carefully in talented and dedicated people, as well as the resources they depend on to deliver value to clients. Our funds have a strong track record of industry-leading performance, with over 70 percent of assets under management having either 1st or 2nd quartile performance over the past 10 years. We have consistently been recognized by Lipper, with the award for Best Overall Fund Family in Canada going to RBC or PH&N in 4 of the last 5 years. Client service and strong relationships with distribution partners are also key drivers of success. Our commitment to delivering excellent service to our clients is a core value. As a result, institutional clients and consultants have rated PH&N top quartile in terms of quality of service for the past 5 years and at RBC Asset Management, the legacy mutual fund business, we continue to experience among the lowest redemption rates in the industry at 1.1 percent of assets.

9 Growing and retaining assets is of course a critical component of success, and we are growing our long-term assets faster than the overall investment fund industry. Our long-term assets have grown 15 percent over the past 12 months, compared to the industry at 11 percent and was broadly based across our entire fund family. We benefit from our strong relationships across RBC s multi-channel distribution network, the largest in Canada. RBC s retail branch network is a powerful and valued partner to us, with 75 percent of our sales coming directly from Canadian Banking as a whole. We also work closely with all advice-based distribution channels within RBC, including Dominion Securities RBC PH&N Private Counsel and our other international wealth divisions. As I will discuss momentarily, a wonderful opportunity exists for us to deepen our relationships across the entire RBC network. We are fortunate that RBC Global Asset Management s overall asset mix as a business is wellbalanced between equities and fixed income to the extent that market volatility has a relatively benign impact on our mid to long-term financial performance allowing us to confidently extend our view in the management of the business. Balanced funds represent 29 percent of our longterm assets, versus the industry average of 22 percent. Our commitment to meeting the evolving needs of investors with new and innovative investment solutions ensures that our fund offerings remain relevant. This is a great strength of ours and over the last 10 years, we have significantly expanded our capabilities across asset classes and portfolio solutions. Our recent launch of laddered bond ETFs speaks to our ability to enter into new areas of opportunities with minimal risk to our financial position. In this case we worked closely with DS, RBC Capital Markets and RBC Direct Investing to fully understand the inherent size of the opportunity, as well as the operational and financial investments required to make a sustainable entrance into the ETF space. A final key driver is cost management, it is of utmost importance to us as we plan for significant growth. Our growth projections include the maintenance of our profit margins well above industry averages. Our ambitious growth plans will not be at the expenses of eroding shareholder value. Moving to Slide 29, today, our asset management business benefits from a diverse client base. We manage money for more than two million Canadians and well over 500 institutions around the world. Over the past few years, we have not only grown the size of our business, but have broadened our geographic investment coverage. We will continue to enhance our global product suite to meet the needs of our clients in Canada, the U.S., Europe, Latin America and Asia. I would now like to spend a few minutes discussing specific businesses in RBC Global Asset management. We have industry-leading retail capabilities in Canada, a strong presence in the North American institutional market, and growing global capabilities to target the institutional and high net worth client segments. Let s start with our retail business on Slide 30. In Canada, given our distribution and product strength we have leading retail capabilities that have established us as the largest fund company, with 15 percent market share and more than 110 billion dollars of assets under management. Our strength in Canada is driven by having the largest and most integrated advice-based retail distribution network. With unrivalled breadth in our dedicated retail sales force, Investment and Retirement Planners as well as licensed professionals in branches and call centre roles, we have the ability to collaborate across businesses and to serve all client segments through multiple distribution channels, including RBC s self-directed platform, RBC Direct Investing. As you can see, our ability to grow long-term Canadian mutual funds is demonstrated on Slide 31. Since the markets bottomed in 2009, investors have continued to shift their allocations back

10 towards long-term funds. RBC Global Asset Management has been able to capture a disproportionate share, over 25 percent, of industry long-term sales since We are focused on extending our Canadian retail strength using both our RBC and PH&N fund families to reach all client segments through our multiple distribution channels. Turning to Slide 32, The addition of Voyageur Asset Management in the U.S. and Phillips, Hager & North in Canada, has enabled us to broaden and grow our institutional client base across North America and recently we have launch a Luxembourg-based fund family to capitalize on existing opportunities with offshore institutional investors. We are an institutional leader in Canada of fixed income and liability-driven investment solutions which is an area with strong growth prospects. Today, more than ever, institutional investors look to match their investment strategies with their anticipated liabilities. Turning to Slide 33, looking at our international asset management capabilities, our combination with BlueBay Asset Management was a significant step in building our global business. As you know, BlueBay is a U.K-based leading global fixed-income firm, specializing in corporate credit and emerging market debt, with both long-only and alternative capabilities. BlueBay brings new institutional clients along with a sales team that has established broad relationships across 35 countries including the U.K., Europe and Asia which will help further expand RBC s geographic reach. We are very pleased to be able to offer the internationally recognized expertise of BlueBay Asset Management to RBC s clients and prospective Canadian and U.S. investors. BlueBay offers investors the ability to diversify income sources and access new investment opportunities, particularly in emerging markets. BlueBay s industry-leading product development capabilities are a great fit with RBC Global Asset Management as we have been able to provide seed capital for the development of new innovative products for delivery within the RBC network in Canada, the U.S. and abroad. On Slide 34, you can see that there are significant opportunities to introduce and increase GAM products in RBC s distribution channels. Currently, only 20 percent of the long-term assets administered by Canadian, U.S. and International Wealth Management businesses are managed by RBC Global Asset Management. For some of our global competitors this figure is 40 percent or more. In our Canadian Wealth Management business, we have achieved significant success, increasing long-term fund share to 44 percent from zero, in just over a decade. There is a clear opportunity for us to further increase the proportion of RBC-managed products that are used by our Wealth Management advisors and clients, especially in our U.S. and international businesses. Obviously, these opportunities must earn the confidence of clients with world-class investment performance and service. Lastly, turning to Slide 35 and to summarize going forward, we are focused on growing our worldwide presence by building a global high performing asset management firm. First and foremost, through increased collaboration with our RBC partners in Canadian Banking, Insurance and Capital Markets, we are leveraging the breadth and depth of RBC s capabilities to provide value-added services and solutions to both individual and institutional clients. On the Canadian retail investment fund side we are looking to capitalize on retirement trends and the increased demand for income-generating products. With our strong capabilities in providing retirement-oriented solutions we have already begun to see the benefits as evidence by our longterm fund sales. In addition to our opportunities to further our ties with existing clients at RBC as I discussed, we have also made significant investments in people and services to meaningfully increase our share of the 3rd party investment advisors channel. In 2011 we hit a record of $2 billion in gross sales with 3 rd party advisors.

11 On the institutional side, we are focused on increasing our market share by strategically adding depth of expertise and broadening our range of mandates. Through the collaboration of RBC, PH&N and BlueBay across the organization. In the U.S., we are looking to grow institutional market share by accelerating BlueBay s growth and further partnering with RBC Capital Markets to provide customized products to serve the unique needs of RBC clients. Globally, as mentioned, we are focused on building our non-north American asset management capabilities by broadening the breadth of our product suite and service offering to serve the needs of our rapidly growing wealth businesses. Clearly we have a lot of organic growth potential, but to reach our top fifty goal in this highmargin, low capital intensive business. We will look to further expand our asset management capabilities through strategic acquisitions. Now I will pass you to John Taft to go over our Wealth Management U.S. business. JOHN TAFT, CEO WEALTH MANAGEMENT U.S. Thanks, John and good morning everyone. It is my pleasure to be here to talk to you about our wealth management business in the U.S. As you can see on Slide 37 our Private Client Group which we call PCG, is our largest business and has evolved to become the 6th largest full-service national advisory firm by financial advisors and the 7th largest wealth manager as measured by assets in the U.S. We achieved this through top-tier growth over the last decade that has enabled us to become a truly national firm through both acquisitions and strong recruiting. I should note that we had exceptionally strong recruiting through the financial crisis, as record levels of top-performing advisors were attracted to the strength and stability of RBC as well as to the breadth of our wealth management capabilities. In fact, we recruited advisors with $200 million dollars in production during this period, starting in the middle of To be a global leader in Wealth Management it is critical to have a meaningful presence in the United States. We have established this presence and have broad coverage with advisors serving clients in 42 states. With the growth we have experienced, PCG has achieved the scale necessary to compete with the larger scale, more traditional U.S. brokerages, and we continue to differentiate ourselves in the market with our high quality service and with breadth of product offerings, backed by the strength of RBC. Our success is driven by our unique combination of a small firm culture along side the resources of a global financial institution and this is extremely attractive to both clients and to advisors. Most recently, J.D. Power and Associates awarded us top marks for overall investor satisfaction - a significant accomplishment and a testament to our progress in the U.S. Now that we have achieved scale in our PCG business, our key objective is to improve productivity and efficiency. On Slide 38 you ll see that RBC Wealth Management U.S. is also comprised of two other complementary businesses International Wealth; and, Correspondent and Advisor Services, or CAS. Together with PCG these businesses create a powerful distribution network for us to deliver advice and services to our clients.

12 Each of these businesses deliver full service wealth management advice, products and services to clients either directly, through RBC client-facing advisors or indirectly, through correspondent brokers or registered investment advisors (RIAs) that work with CAS clients. Our International Wealth business was moved into Wealth Management U.S. as a part of our transformation just over a year ago, and is an important business for us given the increased interest from foreign clients who are attracted to the strength and stability of RBC. Going forward, we see opportunities for increased collaboration between this business and our largest business, PCG. Our Correspondent & Advisor Services business, partners with independent broker-dealers and independent RIAs. These firms and RIAs work with RBC to leverage our back office systems, products, and services in order to serve their clients needs. Since the end of 2008, assets administered by CAS Financial Advisors have grown from 22 billion to 36 billion U.S. dollars at the end of the third quarter. This increase was driven in part by the acquisition of JP Morgan s RIA business, by business development, and by market growth. Turning to Slide 39, as you can see we have been growing our assets under administration and improving our revenue per financial advisor. As George mentioned, we have a significant opportunity to improve our profitability, although we do not expect to reach the same performance levels as our Canadian brokerage business as the U.S. industry dynamics are significantly different. For example in Canada, clients tend to consolidate their business with a single advisor, whereas in the U.S. clients tend to spread their investments across multiple brokerage firms and advisors. Our focus for growth in the U.S. is on gaining a greater share of wallet by becoming a primary advisor. Clients with whom we have a primary relationship will do more business with us than with any other financial institution. We have made significant progress as our share of wallet has steadily improved from 50 percent in 2004 to 63 percent in 2010 and the likelihood of one of our clients referring their Financial Advisor has gone from 59 percent to 79 percent over the same time period. This focus over the next four years will help drive revenue per advisor from our current level of approximately $630 thousand U.S. dollars to over $1 million U.S. dollars. We will achieve this through increasing advisor productivity, which I will touch on a little later. Improvements in pre-tax margin will again be driven by our shift from growing advisors to retaining advisors, improving productivity and increasing operating efficiencies. An improvement of 5 percentage points to our pre-tax margin, from 8 per cent to 13 percent, would add approximately $45 million U.S. dollars to our earnings. Turning to slide 40, we have a focused strategy to improve our pre-tax margins and profitability that centers on four key areas: Increasing advisor productivity; Improving operational efficiencies; Leveraging RBC capabilities; and Growing our complementary distribution channels. To increase advisor productivity, including revenue per advisor, we have taken steps to grow feebased assets by simplifying our pricing, developing more packaged solutions, and using technology to make it easier for financial advisors to do business. We are also enhancing our suite of credit and cash solutions to allow us to deepen our client relationships, which is one of the drivers of share of wallet which I talked about earlier. We also offer advisors innovative practice development programs to improve productivity the more time a financial advisor has, the more time they can spend with clients, which improves

13 client satisfaction. These programs have been designed to assist different segments of financial advisors depending on what level they are at in their career. For example: FA Forward is a program that helps take our lower-producing Financial Advisors to the next level. Jump Start targets Financial Advisors with $500 thousand dollars in production to $1 million dollars in production and focuses on segmenting their book to focus more on profitable business and on client planning. Top Gun is designed for our high-end Financial Advisors, where they focus on team effectiveness as well as book management and business planning. We are continuing to invest extensively in technology to automate processes as well as implement client relationship management tools that enable advisors to service their clients more efficiently. For example, we have reduced the number of potential manual touch points in our Wire Transfer process down to 8 from 23. This is all about freeing up time for advisors and support staff so they can focus less on administrative tasks and more on their clients. By collaborating across our businesses, we have been able to develop innovative investment solutions for our clients as well as grow our complementary distribution channels to scale. For example, CAS is now leveraging the practice management tools developed for PCG to help its clients, and therefore grow its own revenue. We are also focused on leveraging existing RBC relationships. For example, we have created and are aggressively growing an institutional middle markets fixed income joint venture with RBC Capital Markets in which advisors sitting in PCG branches serve the needs of Tier II, Tier III and Tier IV, institutional clients that are below RBC Capital Markets target client market. Finally, we are also looking at additional bolt-on acquisitions for CAS, similar to the JP Morgan acquisition, to further grow this attractive business. In our International Wealth business, we are increasing the number of advisors and relationship managers to continue to expand our presence serving foreign clients. Additionally, we are analyzing our capabilities with the intent of introducing them to our Private Client Group where it makes sense. We are setting up a referral process between PCG and our International Wealth business, in an effort to better serve and retain those clients with more sophisticated needs. In conclusion, I am extremely pleased with our progress. We have achieved significant scale and we have a clear plan for future growth. We are shifting from growing or acquiring advisors to retaining advisors and we are focusing on driving improved productivity to revenue of $1 million dollars per advisor and we are focused on achieving efficiencies to drive stronger operating performance measured primarily by pre-tax operating margins. With that, I will now hand it back to George to talk about our other businesses, starting with Global Trust and Wealth Management U.K. Thank-you. GEORGE LEWIS, GROUP HEAD WEALTH MANAGEMENT Thank you John. Turning to Slide 42, as I mentioned earlier, as part of our transformation in 2010, we have established a separate Global Trust business headed by Paul Patterson, to highlight our world-class off-shore trust capabilities, which is a key differentiator of our client offering particularly outside North America. Our value proposition of providing integrated wealth management solutions through teams of professionals with complementary expertise is unmatched in this industry.

14 By leveraging our world-class trust capabilities, we are also building our wealth management business in the U.K. with a focus on both domestic clients as well as our traditional base of international clients with interests in the U.K. As you can see from Slide 43, we have a very diverse revenue stream driven by our ability to serve an international client base in our Global Trust business. International high and ultra net worth individuals value our diversified product offering, multijurisdictional wealth management planning capabilities and our differentiated value proposition all of which provide a clear competitive advantage. Importantly, given an environment of increasing global regulation, our strength in professional tax planning and expertise in structuring on-shore and off-shore affairs provides our clients with the sound advice they are looking for in managing their global wealth. And in recognition of our success the Society of Trust and Estate Practitioners recently awarded us Institutional Trust Team of the Year. Turning to Slide 44. Global Trust s growth plans involve increasing market share and strengthening existing client relationships and improving overall efficiency. First, in order to grow market share we are expanding our product offering to develop solutions for more clients across the RBC Wealth Management segment. International clients continue to value off-shore jurisdictions for their wealth solutions, and we are targeting clients in both developed and in emerging markets. In markets such as Eastern Europe and the Middle East for example, we are building client relationships. These clients are drawn to stable, transparent and regulated financial centers in order to protect their wealth for future generations. The second key to our growth is broadening client relationships. Clients value our approach, accessing the full complement of wealth management solutions through one touch point, their Primary Relationship Manager. We intend to support our growth by improving our processes, making it easier for clients and our professionals to transact business while driving our costs lower. To do this, we have created centers of excellence to take administrative and non-client facing responsibilities away from our client-facing professionals in order to increase their time with clients. In addition, we are investing in technology to transform and improve our overall operational processes and business efficiency. We are also investing in our people and solutions to improve the client experience and make our client professionals more productive. For example, we recently streamlined our client on-boarding process. Finally, to be a truly global wealth and asset manager you need a significant presence in the U.K., which contains 10 percent of the world s wealth, with ultra high net worth clients representing one of its fastest growing segments. At present, it is a very fragmented market - one with no clear leader and many small and medium size players. In fact, the largest player in the U.K. has only one-third of the assets of our Canadian wealth management business. While many of our European and U.K. competitors are focused on shoring up capital and strengthening their balance sheets, our strong financial position sets us apart and gives us a tremendous opportunity. Leveraging the strength and capabilities of our Global Trust and Global Asset Management will also help build our U.K business.